Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The firm Forever Forever Co. produces Fancy Watches (TM) and must decide whether to accept a supplier's offer to provide an essential input: watchface glass.

The firm Forever Forever Co. produces Fancy Watches (TM) and must decide whether to accept a supplier's offer to provide an essential input: watchface glass. This supplier is willing to supply the input for $45 per unit. Forever Forever Co. requires 5,000 units of watchface glass every month.

Currently Forever Forever Co. produces watchface glass with its own machinery and labor. The machinery is leased for $175,000 per month, and labor salaries are $95,000 per month. Also about $10,000 of other costs per month are incurred from producing the input.

If the firm buys the part, all costs from making the input can be avoided.

Which of the following is TRUE?

a.

It is $55,000 LESS profitable to buy this input than to make it.

b.

It is $40,000 MORE profitable to buy this input than to make it.

c.

It is $55,000 MORE profitable to buy this input than to make it.

d.

It is $40,000 LESS profitable to buy this input than to make it.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Social Media Audit Measure For Impact

Authors: Urs E. Gattiker

2013 Edition

1461436028, 978-1461436027

More Books

Students also viewed these Accounting questions